I'm confused how do I start quickpwn? The first step says I need to choose firmware to restore iPHONE but ITUNES says that my SIM card isn't recognized or something since I have TMOBILE sim card inside, how am I supposed to choose the firmware for my phone then?

Check what OS you are using on your iPhone right now (Settings->General->About->Version) and download that firmware IPSW from iPod and iPhone Firmware Download

Use the IPSW file to restore your iPhone through iTunes (if needed) and then use QuickPwn (provide the IPSW file downloaded). I'd suggest you wait till someone can backup my post coz I do this for my 3G. Not sure if things have changed for the 2G or not!

Disconnect the iphone and turn it off.
Hold down the home button and connect it to the USB port. The iPhone should enter restore mode. USB cable and iTunes logo on the screen. You can then choose the new firmware with iTunes and install it. If you have iPhone 2G and it has been unlocked before the baseband is still unlocked. All you need is to activate it with QuickPwn.

Use QuickPwn to jailbreak, activate and unlock the iPhone. Follow the instructions how to enter the DFU mode but before doing that I would recommend you quitting iTunes and iTunes Helper just so it doesn't start up during the QuickPwn process.

//Rob